Your Right to Know

WASHINGTON — An Internet connection and a bunch of stolen identities are all it takes for crooks
to collect billions of dollars in bogus federal tax refunds. And the scam is proving too pervasive
to stop.

A government report in November said the IRS issued $4 billion in fraudulent tax refunds over
the previous year to criminals who were using other people’s personal information. Attorney General
Eric Holder said this week that the “scale, scope and execution of these fraud schemes” has grown
substantially and the Justice Department in the past year has charged 880 people.

Who’s involved? In a video message released ahead of the April 15 tax-filing deadline, Holder
said the scams “are carried out by a variety of actors, from greedy tax-return preparers to
identity brokers who profit from the sale of personal information to gangs and drug rings looking
for easy access to cash.”

Even Holder isn’t immune. Two men pleaded guilty in Georgia last year to trying to get a tax
refund by using his name, Social Security number and date of birth on tax forms.

The IRS says it opened nearly 1,500 criminal investigations related to identity theft in fiscal
year 2013, a 66 percent increase over the previous year, and has strengthened filters that help
detect where the scams are coming from. It says it stops far more fraudulent refunds than it pays
out and is making a dent in the problem.

What can taxpayers do? The most important step: Protect their Social Security numbers.

Thieves steal Social Security numbers in any number of ways, including from publicly available
sources or workplaces. Victims include schoolchildren, prisoners, Medicaid beneficiaries and the
deceased.

Criminals use the information to file false returns and then pocket the refund checks, often
before the legitimate taxpayers have had a chance to submit their own returns. It’s a crime made
easier by electronic tax filing, which lets crooks mass-produce fraudulent returns.

In the latest sweep in south Florida, a hub for refund fraud, federal prosecutors last week
announced charges against 25 people for using thousands of stolen identities to claim $36 million
in fraudulent tax refunds. In one case, a middle-school food-services worker is accused of stealing
students’ personal information from an electronic database.

In Washington, a barbershop owner pleaded guilty last year to running a $20 million fraud scheme
that sought tax returns on behalf of nursing-home residents, prisoners and the dead.

Some people sold their own personal information, while others turned it over after being led to
believe they were entitled to “Obama Stimulus Money” or an income-tax refund.